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Dollar advances but gains limited ahead of G7

TOKYO: The dollar advanced against the yen in late on Monday afternoon trade in Tokyo supported by firm bids from Japanese investors and short-covering ahead of a Group of Seven meeting on April 15, dealers said.

The dollar's uptrend gained momentum after it hit stop-loss buy orders placed at 105.70-105.80 yen, which paved the way to a one-week peak of 106.18 yen, but further gains were blocked by offers from Japanese exporters and overseas fund operators.

"We've detected large bids from Japanese investors, prompting speculation that the bids were related to fresh foreign investment for (Japan's) new fiscal year," a US bank dealer said.

He said that with many dealers also pretty short of dollars, they rushed to cover those positions after the dollar rose unexpectedly in early trade as tension in Korea appeared to heighten.

Dealers said some safe-haven buying emerged after North Korea announced it would be making a major statement.

But the fears were unfounded as the statement was to confirm a summit to be held between South Korean President Kim Dae-jung and North Korea's reclusive leader Kim Jong-il on June 12-14.

The dollar stood at 105.97/6.02 yen in Tokyo compared with a US close of 105.36 yen on Friday.

Persisting speculation that Japan would seek support for a weaker yen from its partners at a meeting of G7 finance ministers and central bank chiefs in Washington on Saturday induced unwinding of yen-long positions.

Vice Finance Minister Nobuaki Usui said on Monday he does not expect any major changes in the G7 nations' stance on currencies at the meeting compared with their stance at the previous meeting in January.

Financial markets will be keenly watching how the G7 nations express their views on currency movements in a statement expected after the meeting.

After January's meeting in Tokyo, the G7 nations said in a statement that they "welcomed the reaffirmation by the Japanese monetary authorities of their intention to conduct policies appropriately in view of their concern, which we share, about the potential impact of yen appreciation for the Japanese economy and the world economy".

Although many traders reacted little to Usui's comments, the market was expected to stay cautious about bidding the yen too aggressively before the meeting.-Reuters